Issue Jones Act Market International Market
Vessel ownership US Ownership (minimum 75%) Any (large shipping companies)
Vessel registration USA Any (flags of convenience)
Shipyard US Located Any (mainly Asia)
Vessel crew US citizens Any (developing countries)
Vessel type Mostly coastal and river Mostly deepsea
Vessel trading privilege Cabotage within USA International shipments
Legal jurisdiction US Federal Court Country of registration
Taxation US corporate taxation system Mostly offshore
Barriers to entry Very high Low
Competition Statutory protection against foreign competitors Intensive / Oligopolistic
Source: adapted from B.M. Karatzas (2009) "A Primer on Leasing Transactions in the International Maritime Sector", Journal of Equipment Lease Financing, Vol. 27, No. 3, pp. 1-8.
The Jones Act and International Maritime Markets
The Merchant Marine Act was implemented in 1920 to regulate maritime commerce between American ports. Section 27 of this act is known as the Jones Act, which regulates cabotage and is under the jurisdiction of the US Coast Guard (and thus of the US Federal Court). The above table resumes the main requirements of the Jones Act. Cargo transported between American ports must be carried by vessels of US ownership (minimum of 75% ownership), built and registered in the United States and manned by American citizens (or permanent residents). Shipping companies abiding to these requirements are able to service the domestic American market, which also includes Hawaii, Alaska and Puerto Rico, and receive statutory protection against foreign competitors. The purpose of the Jones Act is to protect portions of the American maritime industry (shipbuilders, operators and labor) and maintain a fleet under direct American control, which addresses some national security concerns. The Jones Act is also subject to controversy. It creates very high barriers to entry, increases cabotage costs, and reduces competition (oligopoly and rate fixing). It thus may have benefited land transportation modes, particularly rail, to the detriment of short sea shipping networks.